Cloud Networking Player GTT Communications Has Its Eye On The Channel

A fast-growing telecom company that has its eye on $1 billion in revenue wants the channel to have a bigger role in its future.

McLean, Va.-based GTT Communications Wednesday said it plans to buy Dublin, Ireland-based Hibernia Networks for $590 million. That total is comprised of $515 million in cash and approximately 3.3 million shares of GTT, which are valued at $75 million.

As GTT is adding transatlantic fiber routes and optical networking capacity with the Hibernia purchase, the company is aiming to sell more services through the channel.

"We continue to say publicly that we are under-represented in the channel and we'd like to change that," said GTT CEO Rick Calder in an interview with CRN. "We both have growing channel partner programs and historically both companies have taken the direct routes to market.

"We see growing channel partner programs at each firm and, just as the firms together will grow faster, the channel programs, if combined, will grow faster as well."

GTT's channel partner program today, Calder told CRN, accounts for less than 10 percent of the company's sales. He declined to provide a breakdown for Hibernia's channel program particulars.

Unlike many telecom firms, GTT has a very straightforward approach to the services it sells. The company sells secure network connectivity from any location in the world and to any application in the cloud. It provides cloud networking, not cloud services, according to Calder.

Specifically, GTT sells dedicated internet access, SIP trunking and other voice services, managed network services and wide-area networking connections (Ethernet and MPLS) to large enterprises, governments and other service providers.

Calder is also clear about what GTT is not going to do. "I don't like serving small- to medium-sized businesses. They churn, they're more difficult to serve, and the costs are higher and there's more competition there," he said.

"I also don't sell cloud services. I'm partners with Microsoft Azure and Amazon Web Services and Google and other major content delivery and cloud service providers," Calder added.

That clarity of strategy, Calder said, is GTT's advantage and something other telecom companies don't have, as they are constantly buying and divesting assets.

"Look at CenturyLink," Calder said. "They spent lots of money buying Savvis and now they're selling it. Look at Verizon. They spent lots of money buying Terremark and now they're selling it."

The optical transport services provided by Hibernia, a new market for GTT, fits its strategy, Calder said. "It's a perfect complement to our business."

About 74 percent of GTT's revenue comes from large enterprises with 21 percent coming from carriers.

The majority of GTT's revenue -- 87 percent – comes from the U.S. and the company has bought eight other firms in the past 10 years. Through acquisitions and organic growth, GTT's "next financial objective," according to Calder, is to achieve $1 billion in revenue.

"We'll be well over $700 million in revenue with the combination of Hibernia Networks, so we think we'll get there pretty soon," Calder told CRN.

The company reported third-quarter earnings of 14 cents a share and net income of $5.1 million on revenue of $131.9 million. Earnings were up nearly 36 percent from the same quarter a year ago.

The Hibernia transaction is expected to close during the first quarter of 2017.